Why Microsoft Sincerely Fears the iPod

by Chris Seibold Jul 11, 2006

Recently rumors have been flying like bats out of a New Mexican cave that Microsoft is all set to foist, yet another, digital music player upon the market. The rumors feature a delicious new twist in the never ending game of iPod dethronement. The hook? The Microsoft gadget will give you, without charge, copies of the songs you have already purchased from iTunes. Finally, many speculate, the end of the iPod’s reign is near.

At this moment it becomes very tempting to discuss the ludicrous notion that you should have to either rebuy, or be essentially gifted, the music you already purchased. Yet that discussion will be avoided, the path only leads to madness… well intractable quarrels. The truth is that that particular discussion sparks interest but misses the larger picture completely. The question shouldn’t be “will the rumored Microsoft DAP finally unseat the iPod?” or “Why isn’t FairPlay more fair?” No, the question everyone should be asking is: why is Microsoft so desperate to get into the digital audio market in a large way?

The most obvious answer, and no doubt a small part of the motivation, is money. Looking at the projections for the market-growth and the money iTunes and the iPod are already making one can see the obvious financial enticement. The googly eyed stare those kinds of numbers elicit make it seem apparent that Microsoft wants in on the action because they want to grow. Temper that initial reaction by recalling that as a music retailer Microsoft will only get a fraction of the cash. The hardware component is more profitable but not a big enough market to earn Microsoft’s focus. Once that realization is made it becomes apparent that, even with the optimistic growth projections, the actual monetary benefit to Microsoft would be on par with the change found in Bill Gates’ couch.

So if Microsoft isn’t going after the iPod market for yet another cash grab, why are they so interested? Here most people will tell you that is just the way Microsoft operates, anything involving 1’s and 0’s is considered in Microsoft’s realm and must be dominated at any price. Except that isn’t really the case. Microsoft hasn’t sicced their programming hounds on Adobe, it has not unleashed a hurt on AutoCad, and the company hasn’t gone Norman Bates on Accenture.

The only tenable conclusion is that Microsoft picks its battles carefully. They took on the Mac when the company felt the GUI was the way of the future. They saw the internet going huge and decided to destroy Netscape. When the internet was being redefined by Google….well, Microsoft is trying but Ballmer needs more chairs. It is clear that Microsoft doesn’t go after a market in a substantial manner unless they think there is something crucial to their continued well-being.

Hence, a full on assault on the iPod would indicate that Microsoft thinks that the iPod is the gadget of the future. Why would Microsoft think that the iPod is an actual threat? Because Microsoft believes the home computer is dying. The company is certain that, in the not too distant future, we will live in a world where the computer is fully integrated into our lifestyle and we won’t even know it is there.

Once that thought is fully actualized, everything becomes clear. Microsoft’s push into gaming is little more than a method to assure a presence in what could become the replacement for the home computer. When the software for cell phones is written by Microsoft it isn’t because Microsoft is desperate for the added revenue, it is because they don’t want to miss the home computer devolution. Same for the office phone, the Palm and the iPod.

The company is well aware that any of these devices could do all the computing functions that the average user requires. The iPod is more than powerful enough to check your mail, the Xbox 360 can browse the internet with aplomb and a handheld can be used to word process. These are things Microsoft sees as replacing the traditional computer. These are the things that worry the company.

It makes some sense, the iPod has ratcheted up the functionality a few notches since the diminutive player was introduced with the addition of pictures and video. It is also true that the iPod is capable of much more. The part that Microsoft might be missing is that the iPod isn’t striving to be a all in one wonder like the oft touted Origami, the iPod relies on simplicity. Expecting Apple to trade one of the iPod’s strongest selling points in an effort to become the only computing device a person needs is a bit of a stretch.

You can check the veracity of this conclusion by inspecting a Microsoft DAP should the company release one. If the thing has functionality duct taped on at the expense of ease of use you can rest assured that Microsoft is scared that the iPod could replace their core business. If it is just a copy, weak or strong, of the iPod, then the effort will just be another money grab.


  • I think the home computer is dying, and I think that Apple realised this well before MS.

    But yes, your comments are valid. The iPod is a simple media device, nothing more, nothing less, I can see Apple releasing a rival to Palm, if they put their mind to it, but I wouldn’t buy one.

    I live in the city, If I need the internet, every other shop on the high street will offer me access.

    Recently I learnt that I could ‘surf the web’ with my Nintendo DS (Using the Opera browser cartridge). And i’m more likely to do that, than I am to go out and buy a palmtop computer.

    J A White had this to say on Jul 12, 2006 Posts: 2
  • I agree with everything except for the claim that [any substantial]word processing can be done on a handheld unit.  It can’t, and explains why Origami and all of its predecessors and successors will fail.

    Paul Johnson had this to say on Jul 12, 2006 Posts: 1
  • Maybe a handheld unit that could stand up (had a little flip-out stand on the back) and incorporated the Bluetooth Virtual Keyboard would change that, Paul Johnson. And Jee-sus, would it be cool.

    Benji had this to say on Jul 12, 2006 Posts: 927
  • ...why is Microsoft so desperate to get into the digital audio market in a large way? -CS

    No, $$$ is partly the reason not the whole reason as M$ has a boatload currently. As I’ve mentioned recently, they are freakin’ paranoid at what is going on around them without their control.

    Look how they are reacting to Google’s penetration in the web application/service and their best effor-to-date - M$N Windows Live. Anyone using that service to give us kernels to chew on?

    As for a recent eWeek Labs review, the Windows Live service is a disservice and a failed effort to counter the big G’s offensive front. OK being in “beta” at the present can only be used as an excuse.

    A dire warning has to be on Balmer’s white board: “The enemies are sighted, and we are THEM!”. Balmer, for your sake, read and heed that warning.

    Robomac had this to say on Jul 12, 2006 Posts: 846
  • Oh, and Chris, HTML tag typods detected. Heh, heh. Gotta be careful or the secret sauce is out…

    Robomac had this to say on Jul 12, 2006 Posts: 846
  • Because Microsoft believes the home computer is dying…CS

    I am so sure Bill & Balmer has heard rumblings of such catastrophic rumour enough that Bill decides to get out while he’s on top. That’s one conspiracy theory out there anyway.

    In reality, M$ is the PC’s heart and soul. I am talking about the PC era, not hardware-wise as Apple can also be considered as one. Apple pioneered the PC as we come to enjoy but let’s say that M$ was the one that made the GUI for all to witness (if satisfyingly, that is another matter).

    Yeah, I can digest your theory that in the future, miniature devices having raw processing power greater than the best Core 2 Duos in Intel’s labs will dominate. We have been in this “false start” before - remember the Newton? It was supposed to have spawned the miniature hand-written PC revolution. Today, only a portion of that promised future is at hand with the slew of Palms and Pocket PCs-come-Windows Mobile-whatever. These did not fulfill the Newton’s premise as I remember then. The Newton generation was supposedly to eventually usurp the Macintosh and Windows-based PCs in as short as 10 years!

    That was some vision then and it is still at the present. If the iPod is really the TRUE harbinger of this future, it surely feels that way. But one has to be aware of false prophecies of the past like the Newton and the Origami of today. Just because you come out with an awesomely-designed contraption, however great it may feel to the engineers and designers, only the buying public has the power to elevate such device that status -  and the iPod’s status is approaching holyness.

    So, does the question if the iPod and its ilk is the dawn of that promised future? Maybe. I as a system engineer can envision lots of ways to mold the current iPod design but those are for future discussions in my blog.

    Robomac had this to say on Jul 12, 2006 Posts: 846
  • So, if I may continue, if the iPod eventually “kills” the PC as we know it, then M$ has to, rightfully, feel threatened. And if they feel this heat overpowering Redmond’s hottest days in July, then designing and producing this “killer” device is a defensive move not the other way. They are defending their very lives with this
    contraption folks.

    M$ may have truckloads of $$$ but when you are fighting many fronts in the war to stay alive, $37 billion will not be enough. Well, Bill & Balmer can always count on the Sage of Omaha, Warren Buffet, to give them a hug and a shoulder to cry on… wink Nice article Chris. Very thoughtful.

    Robomac had this to say on Jul 12, 2006 Posts: 846
  • For what it is worth I don’t think the home computer is dying just yet. I can see how the conclusion is reached, the chips that power tiny gadgets far outclass the stuff of yesteryear.

    But like Robo pointed out, the prediction has only been made a million times PDA/phone/thin client. It appears consumers actually want big screens and overpowered machines. I know I do

    Chris Seibold had this to say on Jul 12, 2006 Posts: 354
  • MS fears the ipod because they belated realized they missed the boat AGAIN (Steve Ballmer also admits missing out on Yahoo & Google).

    The scenario was supposed to unfold like this. MS sees the movement into a “connected” computer based entertainment systems - MS develops a nuts to bolts solution complete with compression, file format (their HD format slips my mind right now), MS servers and DRM. Like the fabled PC days of yore, MS wants to control the pipeline and of course, if you want to flow anything through it - they want you to pay them for every transaction. as part of their move, they bought into a bunnch of cable companies.

    So while MS has been selling WMA tracks and movies online since 1999, it’s never been a huge business but Ms wasn’t worried - they figured where else would you go? Ultimately, you’d have to get delivery through your Pc or a Pc like device and of course, they arrogant presumed they could shut out any competitors because they would leverage their monopoly legally or illegally.

    Only problem is the world changed. The “connected” world came true but it wasn’t like AOL or even the cable company’s (how all TV networks have to go through them) - instead it’s the wild free for all internet (for those not old enough, when the internet started to gain traction, MS claimed that the better internet would be MSN). And then once broadband started to take gold, MS grip slipped further. Unlike the early days where IE could buy up the desktop and most people wouldn’t wait for another browser download let alone figure out how, their desktop monopoly became more meaningless.  90% of what ‘average’ people needs were fulfilled with a browser, email and could do most else online.

    MS basically is France 1939. They built the Maginot Line and then belated realized airplanes   and tanks could drive around a fixed permanant “wall.” 

    It’s not the Pc is dying but that MS can longer control anything worthwhile controlling. 15 years ago, they could sign up every Pc manfacturer, now someone like Walmart can pick a dozen countries to crank out a non Windows Pc for $100 wholesale. OS, nevermind having Mac as a choice, how many flavors of Linux are there? Or that people are “content” running Win98 or 2000 or XP.

    And rising from Cupertino is Apple - thought they had knocked them out - okay 3-5% of the market they can concede but the ipod not only kills their belief that they could control TV & music but the ipod makes them look like morons.

    Because at the rate of growth, by end 2007, there will be almost 100 million ipods. How the hell did they miss that one?

    Only asking them to invent the ipod would be like asking Bill Gates to DJ the next beach rave in Rio but of course, they’re not willing to concede that fact. They still think the ipod is a portable HDD that plays media.

    So, it’s almost hilarious. They are going through the checklist (as they always do) ... Harvard Graphics has 20 starbursts, we’ll put 150 in Powerpoint (never mind they’re all ugly and NO ONE needs 150 starbursts) so first, they decided, what doesn’t the ipod have - we’ll out brochureware them! WiFi ... yea, that’s it - people will be able to download music while walking around ... if MS cannot get PLAYS4SURE to work correctly and it’s PLUGGED DIRECTLY in, who really thinks it will work plus Wifi is not EVDO -not broadband - and while it might be free in your house, it will not be free walking around - and in your house, why not plug in?

    The rest of the announced features are non-starters. You don’t think some Pc hacker in Russia will write a utility to make every mp3 look like Appl’e m4p so you don’t think by noon, MS will be on the hook for a billion tracks?

    And the rest of their list is also comical - people like a screen with a large round wheel - CHECK.

    White with some black. CHECK.

    Today, it’s reported their asking accessory makers to make accessories for this thing ... when it’s not organic, it’s like those Xbox 360 faceplates piled up everywhere ... yea, that’s the secret to the ipod - cases. CHECK & double check.

    We’ll charge less for the charging syncing connector than Apple. CHECK. I know that’s why I bought an ipod - because of the connector ... yea, the connector, that’s why MS gravitates towards.

    Meanwhile, the next ipod will probably be an 6” screen that offers a mini mac dock to make it an ultra portable.

    The three tries thing works fine in enterprise because the buyer is not the end user. Consumers do not appreciate something that does not work.

    This thing will last slightly longer than the DJ ditty and will be be hidden in the MS museum with their other hardware failures: MS watch, MS Talking Barney, MS home networking, MS remote, WebTV, etc, etc ...

    jbelkin had this to say on Jul 13, 2006 Posts: 41
  • Only problem is the world changed. -jb

    That statement pretty much sums up what I have been saying and much of yours, jb.

    Much of your very narrative checklists ALL point to a certain [corporate] behavior when you have missed something that your very [corporate] life depends on and you go freakin’ paranoid. M$ is a classic example of that.

    Robomac had this to say on Jul 13, 2006 Posts: 846
  • The answer to Microsoft’s fear of the iPod is simple once you accept the simple idea that Microsoft is a software company. Why did MS build the Xbox, certainly not to make money selling the hardware. MS saw Nintendo and Sony making cash hand over fist selling games and MS wanted a cut of the game pie. So it’s all about money right? Well, no.

    That Apple currently owns the digital audio player market isn’t the issue. Apple also owns the audio download market too and is making inroads into televisio as well as rumored to be in talks with Hollywood. And this is the problem. If Apple manages to tie up the audio and video download markets then who will buy Microsoft’s DRM solutions?

    In the future DRM is either going to be huge for whoever gets the nod, or it is going to be a massive boondogle for whoever gets the nod, or it is going down the tubes. Take your choice but I don’t think DRM is going away anytime soon. Whether the ‘winner’ will turn out to be the winner is another question. But the fact remains MS thinks the delivery of content and the protection of content will be another license to print money. But MS only has a chance if it is still seen as a player in the market.

    Thanks to Apple’s success and the failures of everyone else, MS now risks being locked out of a big market if it doesn’t take decisive steps. Whether the company can pull off something that is in no way a part of its core strengths is another question. Someone inside the company should be asking this question: “If Sony can’t do it, why should we think we can?”

    davidwb had this to say on Jul 13, 2006 Posts: 32
  • . Someone inside the company should be asking this question: “If Sony can’t do it, why should we think we can?” -dwb

    Nice input, David. As for that very question, I don’t think Balmer even have a clue what that means. If M$ wants to be decisive and proactive into getting back into the media delivery and playback market (I coin herein, the MDP market), they have to seriously look past Balmer, zoom past Ray Ozzie, and hire a visionary in this market.

    Hey, Steve! Want to work at M$ for a couple of billions of cash??? I doubt it.

    So, my point is only Apple can shoot themselves in the foot, not M$, not Sony, neither Samsung nor Creative.

    Robomac had this to say on Jul 13, 2006 Posts: 846
  • But the fact remains MS thinks the delivery of content and the protection of content will be another license to print money. But MS only has a chance if it is still seen as a player in the market.

    That’s the most convincing reason I’ve heard yet. 

    And while I agree that MS is primarily a software company, I do think there is some argument to be made for them getting into gadgets and gizmos, since the computer and gadget markets have significant overlap.

    Beeblebrox had this to say on Jul 13, 2006 Posts: 2220
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